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Stating a Case- The 1996 National Securities Market Improvement Act

Fraud and schemes have plagued the stock market since its inception. It is too alluring for some to resist trying to get an undeserved piece of the large amounts of money moved around on the market. Cleverly disguised, fraudulent schemes must always be anticipated and monitored for accordingly. Throughout the stock market’s history numerous rules and regulations have been enacted in attempt to deter deceptive practices, but as the adage goes, where there’s a will, there’s a way.

In today’s world there are many rules and regulation in place to protect investors against fraud, but there are always loopholes and gaps that allow for some to cheat the system. There is a regulation in place, the 1996 Securities Market Improvement Act, which determines whether securities should be monitored at a state or federal level, but is this current system effective in monitoring and protecting investors against fraud?

Supervision and Acts

To understand where these securities rules and regulations come into play, it is important to understand their history. A great place to begin is at the lowest point of America’s stock market history, the infamous crash.

Shortly after the stock market crash of 1929, the U.S. Congress passed two momentous proposals in effort to regulate the stock market and protect investors against fraud, The Securities Act of 1933 and the Securities Exchange Act of 1934.

A regulatory body, called the Securities and Exchange Commission or SEC, was created by section 4 of the Securities Exchange Act of 1934 as an independent agency of the United States government. The SEC was formed to regulate and enforce federally established securities laws and served to establish a government-supervised financial industry. The goal of the SEC was to restore investor confidence in the turbulent and oftentimes fraudulent post-crash marketplace.

While the SEC monitored and regulated securities on a federal level, individual states also enforced statewide securities regulation, to combat fraud at a local level. These state enforced rules and regulations are termed, Blue-sky laws. Blue-sky laws regulate the offerings and sales of securities within a certain state to protect investors against fraud. Most of these laws require securities to be registered at a state level prior to being sold within the state.

Dual Regulation Woes

While registering securities at both state and federal levels served to regulate against fraud at two levels, federal securities laws and state Blue-sky laws oftentimes not only duplicated one another, but added a bit of a headache to the registration and regulation processes as well.

As a first step toward highlighting the need to do away with dual regulations, The Revised Uniform Securities Act of 1985 or RUSA was enacted. RUSA did not remove state-level security registration processes, but it served to prepare for legislative activity that would. It also included an exception on registering securities traded on NASDAQ at a state level, which most states passed in to law between 1985 and 1990.

To further deal with the confusion and other issues that dual regulation caused, in 1996, the US Congress passed the National Securities Market Improvement Act or NSMIA, which amended Section 18 of the 1933 Act. This Act applies to securities listed on the American Stock Exchange, the New York Stock Exchange, and NASDAQ.


NSMIA was adopted as an attempt to create a federally controlled, uniform securities registration code to follow. The code eliminated the need for securities owners of nationally traded stocks and mutual funds to register at both state and federal levels, and thereby pre-empted all state Blue-sky laws. NIMSA did however, preserve states rights to maintain anti-fraud authority over all securities traded within its borders.

While the ability of states to prosecute violations of state-based securities antifraud statutes was left intact, states lost control over much of their securities regulatory authority. This loss of state control can be seen well in the investment advisor arena as NSMIA specifically removed states’ power to regulate securities controlled by investment advisers with Assets Under Management or AUM, totaling over 25 million dollars (including private placements) instead placing them under regulation of the SEC.


Since everything was so simple as to who would govern securities and registration, things were much easier and fraud was reduced, right? Well to a certain degree it was, but there are of course loopholes to the NIMSA act, such as Regulation D Rule 506 offerings, which are exempt from registration requirements.

Regulation D allows for the sale of securities to be exempt from registration with the SEC, if one of three rules are met and as long a company files a Form D with the SEC after their securities are sold. Form D is notice that contains the names and contact information about a company’s CEO’s and stock promoters, but little else.

Regulation D companies that also use the Rule 506 exemption can raise unlimited amounts of money without ever registering with the SEC, and since NSMIA, they are not regulated by the states either, so they enjoy basically no regulatory scrutiny.

This lack of regulation has opened the door to fraud and many argue that it could be easily stopped in its early stages if states were given more regulatory powers.

Should state regulatory ability be re-instated?

There have been discussions by states securities officials that there should be a legislative reform effort to revise state and federal regulatory authority. If states were permitted to exercise regulatory enforcement to address fraud in the beginning stages, then it could be stopped before investors suffer significant losses.

The North American Securities Administrators Association President, Fred Joseph has urged for the adjustment of the AUM or Assets Under Management from 25 million to 100 million arguing that even small investment advisors typically manage more that 25 million. He has also asked that Congress increase state authority to enforce regulation over large investment advisors to counter fraud.

Overall, the arguments seem to be that states should be able to have increased authority to screen for securities fraud at its earlier level when there may just be evidence of slightly deceptive practices instead of downright fraud. This early detection could save investors from the harm of unregulated securities fraud.

By Amy Vincent, sponsored by First American Stock Transfer, Inc., registered with the Securities & Exchange Commission as a Registrar and Stock Transfer Agenthttp://www.firstamericanstock.com. Please link to this site when using this article.

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Since the constitution is small (only 4543words) does this make it more open to interpretations?

And more to ideology and should the right shut their mouths when Democrates don’t read the constitution with the same bias as a right winger
ACTUALLY the constitution does allow congress to regulate interstate business. What that really means is up to you
ACTUALLY the constitution does allow congress to regulate interstate business. What that really means is up to you
ACTUALLY the constitution does allow congress to regulate interstate business. What that really means is up to you

Ismaili Constitution

The word constitution is derived from the Latin constituere means an action of decreeing or ordaining. According to The Oxford English Dictionary (London, 1933, 2:876), “It is a decree, ordinance, law, regulation usually one made by a superior authority, civil or ecclesiastical.” In the broad sense, a Constitution is a body of rules governing the affairs of an organized group.
It is within the core of the Ismaili doctrine that the Imam guides his followers according to the developing conditions of time and society. This outlook is what made Ismailism fluid. Earlier, the traditional council, known as justi dealt the community affairs on good faith. Imam Sultan Muhammad Shah formed The First Ismailia Committee in 1900 in Karachi with a set of rules and abolished the working of the justi. The founder members of the Committee were Varas Ibrahim, Varas Basaria, Mukhi Muhammad Ali, Ali Ghulmani, Kamadia Rahmatullah Lutf Ali, Kamadia Talab, Mukhi Hashuani, Mukhi Ramzan, Ali Muhammad, Asani, Fakir Muhammad, Wali Muhammad and Mukhi Muhammad Ladha Sajan. Finally, the first Ismaili Council in Bombay, comprised of 20 members, came into existence on April 9, 1906 with Varas Ibrahim Muhammad Rawjee (1862-1911) as its first President and Alijah Ahmed Devji (1859-1925) as a Hon. Secretary. Varas Ibrahim Muhammad Rawjee ordained the Constitution of the Ismaili Council on March 4, 1910, whose draft was a splendid testimonial to his scholarly mind. Thus, the Constitutions for different areas of India with certain variations were prepared. It was confined to the workings of the Ismaili Councils in different areas, but was a milestone, which sought to lay the foundation of the progress of the community. The Ismaili Council was a peculiar mixture of a semi-judicial and semi-arbitration body. It was a judicial forum because its aim was to do justice. It was a arbitration board in the sense that it tried to give quick justice without stress of techanicalities and formalities.
In Africa, it would appears from a Civil Case no, 89 of 1894 in Zanzibar, vide Zanzibar Protectorate Law Reports (London, 1919, p. 46) by William Murison and S.S. Abrahams that adjudication of communual disputes rested in the hands of a traditional council (justi) of elders, who were considered authoritative as to the Ismaili customs. Imam Sultan Muhammad Shah was reported the need of the community rules during his first East African visit in 1899. On his second visit to East Africa, the Imam issued the first Ismaili Constitution on September 9, 1905 – a set of written rules and regulations, known as The Rules of the Shi’a Imamia Councils of the Continent of Africa. The Imam said, “I have framed rules and regulations for you, which are the token of my memory. If you follow it, you will acquire great benefit. I entrusted you these rules and regulations behind me as if my tongue, so follow it. If you violate the rules, it will mean you have cut my tongue” (Zanzibar, 17/9/1905). This Constitution foresaw a new administrative organization in the form of a hierarchy of councils; it also established rules for governing the personal relation in the community, especially with respect to marriage, divorce and inheritance. With the Constitution of 1905, the Ismaili community had proved itself capable of providing stability in the midst of an ever-changing and progressive community. Around the same time, the first Ismaili Council was founded in Zanzibar. This Constitution was not published in printed form until 1922 when it appeared in English and Gujrati, then in Germany. By the early 1920s, new centers of economic activity had appeared on mainland East Africa, where the Ismailis had gradually moved. Having lost its importance as the main commercial center of the region, Zanzibar had also ceased to be the seat of the Ismaili community. It was in recognition of these changes, the Imam revised the first Constitution in 1914, 1925 and 1937, instituting separate central councils in the three territories of Tanganyika, Kenya and Uganda. The original council in Zanzibar continued for some time to co-ordinate the activities of the Territorial Councils in matters of common interest. These central functions were later delegated to a Supreme Council, separate from the council in Zanzibar. During the final three decades of the Imam’s Imamate, the hierarchical system of councils, with its subsidiary bodies, was further developed on the basis of periodical revisions of the Constitution for the East African jamats; the revision occurring in 1937 with the formation of the Executive Council for Africa, Ismailia Supreme Council for Africa, Provincial and Local Councils. It was further revised in 1946 under the title of Constitution, Rules and Regulations of His Highness the Aga Khan Ismailia Councils for Africa. The Constitution was again revised in 1954 after the Imam had called a special conference of the East African councilors at Evian in July, 1952 for making necessary amendments in the existing Constitution of the councils. It however remained in force until 1962 when they all were revoked and replaced by The Constitution of the Shi’a Imami Ismailis in Africa. This Constitution was ordained on the 26th of June, 1962 and came into operation on the 11th of July of the same year. It remained operative for 25 years. Accordingly, the administrative hierarchy was headed, after the Imam, by a Supreme Council for Africa, an international body that directed, supervised and co-ordinated the activities of the three Territorial Councils. The Supreme Council, with its changing headquarters in Nairobi and other major cities of East Africa, was also empowered to act as judicial tribunal of the second degree, the highest judicial authority being the Imam himself. The 1962 Constitution also established an Executive Council for Africa with the main function of allocating funds to various organizations. It was once again amended in 1974 to meet the new demands in the society. The constitutional revision was more than anything else an attempt to coordinate local interests as the Ismaili society became more complex.
When India was partitioned in 1947, a separate but still similar Constitution and council system was developed for Pakistan. On March 21, 1961, the Ismailia Federal Council for Pakistan came into existence. Another Constitution was put into effect for the Ismailis of Pakistan on July 11, 1962.. On the basis of the Constitution of 1962 for Pakistan, each Supreme Council was responsible for supervising the activities of some of the 23 Divisional. District and Local Councils throughout the country.
In India, the Federal Council, located at Bombay directed the affairs of four Regional Council for Maharashtra, Gujrat, southern India and eastern India. At the bottom of the hierarchy, there were 28 Local Councils in India, for south Bombay, north Bombay, Jamnagar, Kutchh, Surat, Hyderabad, and so forth. On March 21, 1968, a third Constitution was promulgated in India. During his visit to India, the Imam said on February 23, 1969 in Bombay that, “Last year a new Constitution was introduced for my jamat of India. Many of you may not know that the earlier Constitution was dated 1946, that is for 22 years, our jamat implemented the same Constitution. It was my view, and it is my view, that circumstances have changed sufficiently so that a new Constitution should be introduced. If I have seen fit to introduce a new Constitution in 1968, this means that I may see fit to introduce a new Constitution in 1970, or 72, or 74. This means that no Constitution for our jamat is a firm, solid, immovable document. It is a document, which is created to assist the jamat to administer its affairs satisfactorily and in keeping with the times. Thus, I wish my spiritual children to understand that if through the implementation of this Constitution, it is found that certain matters could be better pharsed, could be amended, could be improved, the Constitution will be continuously amended. The Constitution of our jamat here in India, like in East Africa, like in Pakistan, is a living document and where it is not in keeping with the tradition of the jamat, or in keeping with what the times require, amendment will be introduced.”
The Constitutions of East Africa, Pakistan and India were alike in spirit, but differed in several points according to the different circumstances prevalent in these countries. This was explained by the Present Imam upon his sanctioning The Constitution of the Councils and Jamats of Shi’a Imami Ismaili Muslims of Pakistan that, “Look to the spirit and not the letter of the Constitution.”
On July 11, 1977, a Syrian delegation led by President al-Haek of the Syrian Council visited France. The Imam gave them a special message for the Syrian jamat, in which the Imam said, “On the occasion of Imamate Day, I will be introducing for formal application from now onwards, a new Constitution for my jamat in Syria. I believe this Constitution will assist in improving the administration of my jamat.”
The New Constitution of 1986
The Ismailis are spread in all over the world in different culture and society, and a need arose to ordain one universal Constitution applicable in common for all the Ismailis to improve the organizational structure of the institutions. In March, 1964, the Imam formed a Constitution Review Committee (CRC) under Wazir Anil Ishani (Convenor) with the members, Wazir Mohammad Jaffar, Wazir Ashiqali Hussain, Wazir Abdul Mohammad Furniturewala, Wazir Amirali Rahimtoola, Wazir Zaher Ahmed, Wazir Amir Bhatia, Wazir Zool Nimji and Huzur Mukhi Mahmood Ahmed. The CRC started its working in April, 1984 with a number of field visits in different countries. It submitted reports of its working regularly to the Imam after firs discussing them with the jamati leaders and group of the Imam’s secretariat at Aiglemont. CRC had ten meetings with the Imam, culminating on December 13, 1986, the 50th Salgirah of the Imam with the ordaining ceremony at Merimont, Imam’s secretariat in Geneva. The members of the Imam’s family, including Begum Salimah, Princess Tajudawla, Mata Salamat, Prince Amyn Muhammad and Princess Zahra were present in Geneva during this historical ceremony. The members of CRC and those members from the secretariat at Aiglemont also participated. At 11.00 a.m., the Imam ordained, signed and sealed The Constitution of the Shi’a Imami Ismaili Muslims.
Before the ceremony, the Imam sent his message to the jamat on December 10, 1986, and said, “On the 13th December, I will ordain a new Ismaili Constitution, which will be known as The Constitution of the Shi’a Imami Ismaili Muslims. The Ismaili Constitution will be applicable throughout the world, linking all members of my jamat wherever they are to the Imamate. Islam is a community of faith and throughout the 1400 years of our history, our jamat has lived by the rules and practice of our tariqah as a frontierless brotherhood of men and women. The permanent bond, linking the murid to the Imam and subsisting irrespective of the geographical location of the individual murid, has been and will continue to remain the cornerstone of our jamat’s identity. In our tariqah, the Imam of the Time has always concerned himself with the spiritual advancement as well as with the improvement of the quality of life of the jamat. In this century, in accordance with the needs of the time, my grandfather gave during his Imamate, and I have given in the past 30 years, Constitutions to the jamat in different areas of the world. The ordaining of this Constitution has been preceded by detailed examination of the existing separate Constitutions of the jamat, all of which will be superseded, when the Rules and Regulations applicable to the respective countries come into force. I have recognized that in view of the change in the demography of the jamat, it is necessary to establish new councils and for the same reason to discontinue others. This has been done. In providing the new Constitutional structure, I have also taken account of recent significant developments, such as the increasingly international dimension of the jamat’s settlement and especially my aspiration for the jamat to play an even more active part than in the past in the mainstream of life in the societies in which it lives.” The Imam also said, “It is my belief that the Ismaili Constitution will provide a strong institutional and organizational framework through which my jamat will be able to contribute to the harmonies development of the ummah and of the societies in which the jamat lives.” Besides, the Imam said, “The Ismaili Constitution recognizes and addresses many of the jamat’s present and future needs, but it is to be expected that some adjustment will need to be made in the practical application of the Constitution to meet local circumstances. These adjustment will be made on a case by case basis, in the rules and regulations which will be provided in respect of each country. I am confident that the Ismaili Constitution will give stronger integrated identity to my jamat worldwide, and that in abiding by it in letter and spirit, the jamat will achieve greater peace, unity, happiness, security and well-being.”
The New Constitution is a single unified paramount constitution, which applies to all Ismailis wherever domiciled or resident and superseded constitutions applicable to Ismailis in different countries. The jamat in individual countries, however, have their own rules and regulations by virtue of the Constitution, which makes detailed provisions for their governance and their institutions.
The Preamble to the new Constitution affirms all the fundamental Islamic beliefs and then clearly focuses on the doctrine of the Imamate. It sets out the essence of the Ismaili beliefs as Shi’a Imami Ismaili Muslims who affirm the Shahadah and that the Prophet Muhammad (peace be on him) is the last and final Prophet of God, and that Islam, as revealed in the Koran, is the final message of God to mankind, and is universal and eternal. The Preamble states the authority of the Imam in the Ismaili tariqah and that allegiance to the Imam unites all Ismaili Muslims worldwide in their loyalty, devotion and obedience to the Imam within the Islamic concept of universal brotherhood. It further states that from the time of Ali bin Abu Talib, the Imams have given rules of conduct and constitutions in conformity with the Islamic concepts of unity, brotherhood, justice, tolerance and goodwill.
Complete at Source:


Mumtaz Ali Tajddin S. Ali is an popular Ismaili Scholar, Written many books on Islam and Ismailism, Ismaili Constitution is taken from Encyclopedia of Ismailism, also read 101 Ismaili Heroes

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